Stable supply of chicken boosts Sanderson Farms earnings

Sanderson Farms capitalizing on the popularity of chicken during the quarter.

LAUREL, MISS. — Chicken remains a popular protein and poultry processor Sanderson Farms, Inc. was able to capitalize on the popularity during the third quarter of fiscal 2016.

For the quarter ended July 31, Sanderson Farms net income totaled $54,716,000, equal to $2.42 per share on the common stock, and an increase compared with the same period of the previous year when the company recorded net income of $50,881,000, or $2.27 per share.

Sales for the quarter fell slightly to $727,991,000 from $739,933,000 the year prior. Mike Cockrell, chief financial officer, said the decrease was the result of the average sales price for poultry products declining, but that it was offset by increased volume.

Joe Sanderson Jr., chairman and c.e.o. of Sanderson Farms

“Our results reflect a continued favorable supply and demand balance for fresh chicken sold to retail grocery-store customers and lower grain costs compared to last year’s third quarter,” said Joe Sanderson Jr., chairman and chief executive officer, during an Aug. 25 conference call with financial analysts. “Export demand remains under pressure from several factors, including political issues, a relatively strong U.S. dollar, and lower oil revenues for our export partners dependent on oil revenues to fuel their economies. All avian influenza-related bans have been lifted, except for China, and that has supported leg quarter prices. However, market prices remain below historical averages.”

The latest U.S. Department of Agriculture’s World Agriculture Supply and Demand Estimates Report is projecting 2.6% more lbs of chicken produced next year, but Mr. Sanderson estimated it may be closer to 2%.

“We think there will be a smaller weight gain in 2017 than there has been in the past,” he said. “We know of some companies that are bringing weights down, and we hear there is going to be some other people that may bring weights down in 2017. So I would say two — a total of 2%.”

A recent U.S.D.A. report projects 2.6% more lbs of chicken produced next year.

With ample pork supplies and beef supplies recovering, competition for meat protein at retail is expected to increase.

“I think the market will drift down as we get into the fall, but I think it will recover in January, like it always does,” Mr. Sanderson said. “People are not going to eat ham and pork seven days a week. They’re going to eat chicken. It is less expensive and it is healthier, and I’m not worried about that.”